First Merchants Corp announces $100M stock buyback

MUNCIE, IN - First Merchants Corporation (NASDAQ:FRME), an Indiana-based financial services holding company with a market capitalization of $2.4 billion, has announced the initiation of a stock repurchase program as reported in a recent 8-K filing with the Securities and Exchange Commission. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculations, suggesting potential upside for investors. The new buyback plan, approved by the company’s Board of Directors on Monday, authorizes the repurchase of up to 2,927,000 shares of common stock, which represents approximately 5% of the company’s outstanding shares.

The repurchase program, with an aggregate investment limit set at $100 million, will be carried out at the company’s discretion through open market transactions, privately negotiated deals, or under a Rule 10b5-1 trading plan in compliance with Rule 10b-18 of the Securities Exchange Act of 1934. The company’s strong financial position is reflected in its healthy dividend yield of 3.45% and impressive track record of maintaining dividend payments for 37 consecutive years, as revealed by InvestingPro data. Management has the flexibility to determine the timing, quantity, and pricing of the repurchases based on market conditions, stock price, and other regulatory requirements.

First Merchants Corporation has clarified that there is no obligation to repurchase any specific number of shares and that the program can be suspended or discontinued at any time. The initiative supersedes a similar stock repurchase program that was put in place in January 2021.

This move comes as many corporations engage in stock buybacks as a method to return value to shareholders, potentially stabilizing or increasing the stock price by reducing the number of shares outstanding. The company’s stock has shown strong momentum with a 28% return over the past year, while maintaining a reasonable P/E ratio of 12x and price-to-book ratio of 1.05x.

The company’s announcement provides a clear signal to the market about its financial position and the value it perceives in its own stock. The actual impact of the buyback on the company’s stock performance will depend on a range of factors, including market reactions and broader economic conditions.

Investors and market watchers will be observing the implementation of this program, particularly in terms of how it aligns with First Merchants Corporation’s strategic financial management and overall market performance. With six analysts recently revising earnings estimates upward and a consensus recommendation trending positive, the outlook appears promising. For deeper insights into First Merchants Corporation’s financials and future prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports.

The information for this report is based on a press release statement from First Merchants Corporation filed with the SEC.

In other recent news, First Merchants Corporation reported its fourth-quarter earnings for 2024, surpassing analysts’ expectations. The company achieved an earnings per share (EPS) of $1.00, adjusted from $1.10, against a forecast of $0.89, and its revenue exceeded projections, coming in at $177.11 million compared to the expected $167.76 million. Additionally, First Merchants announced plans to redeem $30 million of its outstanding 4.75% Fixed-to-Floating Subordinated Notes due 2029. This move aligns with the company’s financial management strategy and reflects its commitment to fulfilling financial obligations.

Piper Sandler maintained an Overweight rating on First Merchants, with a $55.00 price target, citing the company’s robust outlook for operating leverage and attractive valuation compared to peers. The firm also noted First Merchants’ strong position to potentially outperform in the current year. Furthermore, First Merchants introduced a 2025 Senior Management Incentive Compensation Program aimed at aligning executive interests with the company’s financial performance. This program offers cash payments to executives based on achieving specific performance goals.

The company’s strategic advancements included technology platform upgrades and branch network reductions, with a focus on core markets. First Merchants anticipates mid-single-digit loan growth for 2025, supported by its strong financial position and strategic initiatives. These developments are part of First Merchants’ ongoing efforts to enhance corporate governance and incentivize leadership.

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